bear stearns 20th annual -...

Bear Stearns 20th Annual Healthcare Conference

Wayne DeVeydtExecutive Vice President & Chief Financial OfficerSeptember 11, 2007

2Slide

Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995

The statements made during this presentation that are not historical facts are forward-looking statements within the meaning for the Federal securities laws, and may involve a number of risks and uncertainties.

Factors that could cause actual results to differ materially from expectations include, but are not limited to, the risks discussed in the Company’s most recent filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2006, and its Quarterly Reports on Form 10-Q for the reporting periods of 2007.

3Slide

Agenda

WellPoint Profile & Superior Value Proposition

15%+ Earnings Per Share Growth Model

Investment Considerations

4Slide

WellPoint: A Health Benefits Leader

Medical Members~ 35 million

Market Capitalization~ $48 billion

2007E*:Operating Revenues~ $60.5 billion

Pre-Tax Margin~ 8.8%

Operating Cash Flow~ $4.4 billion

Note: Membership as of 6/30/07 and market capitalization as of 9/06/07.* Estimated based on projections as of 7/25/07.

5Slide

Diverse Medical Membership Base

BC or BCBS licensed plans

UniCare > 100K members

UniCare < 100K members

BlueCard13%

Self-Funded50%

Fully Insured50%

State Sponsored

6%

Senior4%

Individual 7%

National Accounts

18%Local Group48%

FEP4%

Note: Membership data as of 6/30/07.

6Slide

Brand Name Leader

42%

8% 9% 9%

3%

46%

9% 8% 8%

3%

BCBS in WLP's14 states

Aetna Kaiser UnitedHealthGroup

CIGNA

2005 2006

“When you think of health insurers, which one health

insurance company comes to mind first?”

Source: 2005/2006 WellPoint Consumer Image Studies conducted in WLP’s 14 Blue States.

carry a Blue Cross and Blue Shield ID card

1in3A M E R I C A N S

7Slide

Strong Local Presence

0%

10%

20%

30%

40%

50%

Wel

lPoi

nt M

arke

t Sh

ares

CT NH ME VA IN MO KY GA CA OH NY CO WI NV

Local MarketAdvantages

Provider network advantage

Actionable data advantage

Actuarial precisionCommunity involvement

Source: Company estimates as of 9/30/06.

8Slide

Extensive and Cost-Effective Provider Networks

BCBS National Provider Network*:

928,000 physicians, more than 85% of nation’s total

6,100 hospitals, more than 95% of nation’s total

Deep network discounts

* Sources: Blue Cross Blue Shield Association, Company estimates, 2006.

9Slide

360° Health®: A Fully IntegratedCare Management Platform

10Slide

Consumer Tools Are A Differentiator

CDHP membership has grown by 60% over past 12 months, exceeding 1.2 million at 6/30/07

11Slide

Agenda




12Slide

WellPoint Growth Model

EPS Growth15%+

Profitable Enrollment Growth

Disciplined Focus on Underwriting

Effective Use of Cash Flow

SG&A Ratio Reduction

Specialty Penetration

13Slide

Strong Enrollment Growth

0

10

20

30

40

1999 2000 2001 2002 2003 2004 2005 2006 2007E*

Year

-End

Med

ical

Mem

bers

hip

(in

mill

ions

)

"Same-Store" Membership Acquired Membership

6.3

* Estimated based on projections as of 7/25/07.

7.3 7.911.1 11.9

27.7

33.9 34.1 35.1Expecting growth of 1 million members, or 3%, in 2007*

14Slide

National Accounts: A Growth Opportunity

Proven Results & Room for Continued Success

WLP National Accounts Business Growth

0

2

4

6

8

10

12

12/31/05 12/31/06 12/31/07 **

Mem

bers

hip

* (in

mill

ions

)

Control Accounts BlueCard Membership

National Control Accounts Opportunity

0

5

10

15

20

25

30

Penetration @ 6/30/07 Potential Market ***M

embe

rshi

p (in

mill

ions

)9.510.4

6.4

23.7

44% of Fortune 1000 is headquartered in WLP “Blue” service areas ****

11.0

* Data has been reclassified to conform to current period presentation and includes WellPoint, Inc. and the former WellChoice, Inc. for all periods.** Estimated based on projections as of 7/25/07.*** Represents accounts with 5,000+ employees in WLP “Blue” branded service areas. Source: Company estimates.**** Source: Fortune Magazine, April 17, 2006.

15Slide

The Uninsured: A Growth Opportunity

Low income but not

eligible for current

programs (55%)

Income above 300%

of FPL (20%)

Already eligible for

public programs

(25%)

•Tonik(SM)

•Blue Access Economy

•BeneFits

•Pathways

•Enrollment Vans

•Community Resource Centers

Outreach Efforts:

Need Assistance:

Innovative & Flexible Products:

•Expansion of state health care programs

•Tax credits

•Premium assistance programs

•High risk pools

~ 47 Million Uninsured Americans

In 2006, approximately 380,000 new WLP enrollees were previously uninsured and approximately 187,000 more have been enrolled in 2007

Sources: Company estimates; L. Dubay, J. Holahan, A. Cook, “The Uninsured And The Affordability Of Health Insurance Coverage,” Health Affairs, November 2006; U.S. Census Bureau, August 2007.

16Slide

Medicaid Managed Care:A Growth Opportunity

WellPoint Has Nation’s Largest Medicaid Managed Care Operation

Medicaid ABD & LTC Populations: Significant Growth Opportunities

WellPoint Medicaid Operations

Total Medicaid Enrollees (52M)*

Total Estimated Medicaid Spending

($252B)*

Total Medicaid Estimated Medicaid Spending

75%

19%

6%

31%

36%

33%

TANF ABD LTC

* Sources: Centers for Medicare & Medicaid Services, 2004; Kaiser Commission on Medicaid and the Uninsured, 2004; U.S. Department of Health and Human Services, April 2005.

17Slide

Senior Business:A Growth Opportunity

0

150

300

450

Mem

bers

hip

(in t

hous

ands

)

2006 2007E*0

400

800

1,200

Mem

bers

hip

(in t

hous

ands

)

2006 2007E*

0

500

1,000

1,500

2,000

2006 2007E*

Mem

bers

hip

(in t

hous

ands

)

Medicare Advantage

Medicare Part D **

Medicare Supplement

Additional Opportunities:

Increased options for employer retiree care

Medicare Medical Savings Account (MSA)

* Estimated based on projections as of 7/25/07.** Includes auto-assigned, stand-alone, Medicare Advantage, Group waiver, and external Prescription Benefit Management (PBM) members with the PDP benefit.

18Slide


EPS Growth15%+






19Slide

Stable Benefit Expense Ratio

0%

20%

40%

60%

80%

100%

Bene

fit E

xpen

se /

Pre

miu

ms

2000 2001 2002 2003 2004 2005 2006 2007E*

Standard Deviation of Benefit Expense Ratios**

(2000 – 2006)

AET

CI

UNH

WLP

4.1%

3.1%

2.1%

1.5%


** Company estimates based on peer public documents. UNH includes all segments. AET includes Health Care and Group Insurance segments only. CI includes Health Care, Disability & Life segments only.

20Slide

Pricing Flexibility

33%

7%

22%

11%

27%

0%

10%

20%

30%

40%

Q1 Q2 Q3 Q4 Flexible*

*“Flexible” renewals include individual and small group products in certain states where rates can generally be changed with 30-60 days notice.

Fully Insured Membership Renewal Patterns

Note: Patterns calculated as of 3/31/07.

21Slide


EPS Growth15%+






22Slide

SG&A Expense Ratio Reduction

21.4%19.7% 19.4% 18.9%

17.1% 16.6%15.7%

14.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2000 2001 2002 2003 2004 2005 2006 2007E*

SG&

A Ex

pens

e /

Tota

l Ope

ratin

g Re

venu

e

660 basis point reduction


23Slide

Operating Cost Reduction Initiatives

• Diligent management and prioritization of company projects

• Office space optimization

• Incremental WellChoice synergies ($25 million in 2007)

• Outsourcing relationships, including “basic” customer service calls:

Statement of WorkCost per Transaction Savings per

TransactionBefore After

Senior Front-End Claims

CO/NV Front-End Claims

$1.21

$1.78

$0.44

$0.58

64%

67%

Empire Front-End Claims $0.90 $0.53 41%

24Slide

Long-Term Strategy For OptimizingTechnology Spend

Production Support RegulatoryMandates

Integration

StrategicPlan*

Current ITSpend

RegulatoryMandates

Integration

EnhancementProjects

StrategicInnovation

Enhancement Projectsto Innovation

200615

82%

200712

99%Number of Medical Processing Platforms:

Percent of Membership on Top 6 Platforms:

Successfully shut down 33 legacy platforms, migrating 20 million members over 8 years


25Slide


EPS Growth15%+






26Slide

Full Array of Specialty Products

PBM: Largest health plan-owned PBM in the nation, based on prescription volume, and 4th largest overall (393 million scripts in 2006)

Specialty Rx: Launched in 2005 and rapidly growing

Behavioral Health: 3rd largest health plan-owned behavioral health company, based on membership (20 million members at 2Q07)

Life: #1 in the <100-life group market, based on number of accounts, and 12th largest nationwide (6 million members at 2Q07)

Dental: 7th largest in nation, based on membership (5 million members at 2Q07)

Vision: More than 2.4 million members at 2Q07

Note: Company estimates, 2006.

27Slide


EPS Growth15%+






28Slide

Strong Cash Flow In Excess Of Net Income

$0.5

$1.0$0.8

$1.1$1.0$1.1

$2.5

$3.1 $3.1

$4.0

$3.4

$4.4

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

(In

billi

ons)

2002 2003 2004 2005 2006 2007E*

Net Income Operating Cash Flow

~


~

29Slide

Capital StrategyNew Products &Enhanced Services

Reinvest In Our BusinessAcquisitions

Modest scheduled debt repaymentDebt Repayment

Return to Shareholders$3.0 billion assumed for 2007 share repurchases*


30Slide

Agenda




31Slide

Health Care is a Growing Industry

$1,988

$4,137

$0

$1,000

$2,000

$3,000

$4,000

$5,000

Dol

lars

(in

bill

ions

)

2005 2016E

National Health Expenditures*

16.0%

19.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2005 2016E

National Health Expenditures as a % of GDP*

WellPoint is well-positioned to address the rising cost of health care through our overall value proposition

* Sources: Centers for Medicare & Medicaid Services, Office of the Actuary, 2006.

32Slide

Era of Consolidation inHealth Insurance

27%

73%

54%

46%

1995 2007

Proportion of U.S. Health Insurance Market

Ten largest health plans in each year

Sources: Company estimates, Bear Stearns, Centers for Medicare and Medicaid Services, Office of the Actuary, U.S. Census Bureau, and public company reports (2007 information as of 6/30/07 or the most recent information available).

33Slide

Strong Earnings Momentum

$1.65

$2.26$2.73

$3.05

$3.94

$4.82

$5.55

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

GAA

P D

ilute

d EP

S

2001 2002 2003 2004 2005 2006 2007E*

22% CAGR


34Slide

A Compelling Valuation

Comparison to selected companies

WellPoint Wal-Mart 3M Company($ in millions) 2006 2007 2006

Cash flow from operations $4,044 $20,164 $3,839Capital expenditures & other operating investments (188) (15,666) (1,168)Interest expense, net of tax 254 1,016 85"Free cash flow" $4,110 $5,514 $2,756

Market capitalization as of 9/06/07 $47,870 $175,400 $64,870Long-term debt 6,493 27,222 1,047Market value as of 9/06/07 $54,363 $202,622 $65,917

Market value as a multiple of free cash flow 13.2x 36.7x 23.9x

35Slide

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